Affordable Homes for London Programme 2015-2018

The current affordable rent programme will end on 31 March 2014 and in December the Mayor published the Funding Prospectus for the 2015-2018 programme that will replace it. This briefing provides more background on the current affordable housing programme, summarises the bidding prospectus for the new programme and comments on the programme overall.

Overview

Aside from a number of minor legacy programmes, the expiry of the 2010 affordable housing programme on 31 March necessitates the commencement of a new bidding round to fund housing delivery between 2015-2018.

Key features of the existing Affordable Rent Programme include the following:

• RSLs can charge up to 80 per cent of market rent for new homes built under a significantly reduced grant regime compared to the previous National Affordable Rent Programme (NAHP). • The cost of building new homes can be supplemented by receipts from property disposals and existing empty stock re-let at a higher ‘new affordable rent’ level. • A presumption that RSLs will be supported/supplemented with funding from local authorities using the New Homes Bonus, or using free or discounted local authority land. • ‘Flexible’ tenancies (the minimum period would be two years) would apply to all new affordable rental properties or re-lets. However, registered providers’ tenancy strategies should be aligned with a borough and providers should offer lifetime tenancies should they wish to do so. • At the end of the affordable rent tenancy, providers and their tenant may choose to convert it to shared ownership.

The new 2015-2018 affordable rent programme

The Affordable Homes for London programme will have two overarching strands:

• Flexible Home Ownership (Estimated to be 40 per cent of the programme) • Affordable Rent (Estimated to be 60 per cent of the programme). However these two strands contain a number of sub categories

**Affordable Housing - Flexible Homes ownership**

- Rent to Save – Properties to be let at 80 per cent of market rent with savings plan in place to assist within five years the tenants raising a deposit to purchase the home on a shared or equity basis.
- Shared ownership – Tenants can purchase between 25 per cent and 75 per cent of the value of the home and rent the remaining part of the home.
- Equity loan – Households can apply for an equity loan up to 75 per cent of the value of the property.

**Affordable Homes - Affordable rent**

- Discounted rent – Homes with rents that are set at 80 per cent of market rents or lower if LHA rates are lower. Additional subsidy (from the provider or local authority) can be provided to reduce the rent further.
- Capped rent – Homes with rents at 50 per cent of market rents.

**Bidding criteria and programme management** Overall, the bidding criteria has been shaped by the lessons learned from the previous affordable housing round, reflecting the quality of previous engagement with boroughs and the profile of homes developed.

Key aspects of the bidding criteria and scheme management include:

- consortia or individual providers or borough can bid for funding
- providers need to set out the anticipated location/s of firm schemes
- the agreed funding will be attributed to schemes in each programme as they become firm schemes
- where a firm scheme is part of an initial offer the borough in which the scheme is located should be consulted prior to submission of a formal bid to the GLA
- 50 per cent of grant being paid at the start on site and 50 per cent on completion.
- quarterly and annual reviews will be held with contracted providers/boroughs
- where a framework is agreed the GLA will recommend the providers retain 10 per cent of the newly built rented homes submission of a bid indicates willingness from bidders for all information to be shared with the relevant borough/s they are planning to develop in.

**Bid assessment** The bids will be assessed using three main criteria:

- **value for public money** (an emphasis on offers developing homes for lower amounts of grant/public subsidy)
- **deliverability** (past performance will be taken into account and the extent that a providers is committed to early starts on site)
- **strategic fit** (the extent that Mayoral priorities are achieved such as supporting jobs, and the extent that local authority priorities are addressed).

**The 2015 -2018 affordable rent programme key milestones**

Unlike the previous affordable rent programme, the 2015/18 bidding and contract engagement process will be over a longer period, with the result that the Mayor intends to be in a position to estimate or profile the housing starts (over what period, what bed size and in which boroughs is still unclear) by the end of 2014. The key dates in the programme are set out below: Discussion between registered providers (RPs) and boroughs\
December - March 2014

**Opening of the bidding uploading process**\
3 February 2014

Submission of grant bids from boroughs, RPs and others\
10 March 2014

Discussion between RPs and boroughs on framework agreement\
March - July 2014

Assessment and negotiation of bids\
April - May 2014

**Announcement of bid allocations**\
June/July 2014

Return of signed framework agreements by bidders\
July 2014

Partners in contract\
30 July 2014

Bidding from smaller RPs on specific schemes during\
winter 2014

Estimated 2015/16 profile of starts on the Mayors IMS (investment management system) programme management system\
31 December 2014

**Estimated first starts**\
Early 2015

All starts must have been made\
March 2015

**Estimated first completions**\
Late 2015/Early 2016

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**Commentary**

Unlike the current affordable rent programme, where engagement between registered providers and boroughs was in some instances rushed and often incomplete, with the new round the Mayor says he is: “Looking forward to a comprehensive engagement with boroughs to agree the way the programme will work in different areas”. In addition, the new programme will provide more scope than the current programme for homes to be built at lower affordable rent levels, and partly to address the needs of low income working households. Through this approach it is anticipated that the 2015/18 programme will be substantially less ‘back loaded’ than the current programme which saw the majority of completions towards the end of the programme period.

Borough concerns over the quality and scope of providers’ engagement with boroughs have been met in some measure with an assumption from the Mayor that registered providers consult and respond to borough priorities. However, the timescale for boroughs to discuss and agree a framework with the GLA on how the programme will work in each locality remains extremely tight.

What will be crucial for all boroughs in meeting their needs, aside from the number and profile of homes being built for sale, will be the split between homes for rent built at capped rent and discounted rent levels, and particularly the breakdown by bed size within each category. The emphasis on delivering at least 40 per cent of the programme towards flexible home ownership reflects the Mayor’s aspiration to deliver 250,000 homes for home ownership by 2025.

A fundamental shift from the past programme, and indeed all of the programmes over the past 30 years, is that the Mayor will directly claw back the grant which has been invested in homes which are disposed of or demolished. Referred to as Recycled Capital Grant Fund, this funding, which has previously been retained and recycled by registered providers into funding new housing, will now be passed back to the GLA as part of the overall programme funding.

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**Author:** Nigel Minto, Head of Housing and Planning\
(T: 020 7934 9813)

[Click here to send a comment or query to the author](mailto:nigel.minto@londoncouncils.gov.uk)

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**Links:**

The Mayor’s Housing Covenant 2015-2018 Programme

This member briefing has been circulated to:

Portfolio holders and those members who requested policy briefings in the following categories: Housing and Planning